5 terms you should know related to MicroEconomics

Let us first talk a bit about Economics.

Economics is more of social science that studies production, distribution, and consumption. Studying economics trains us to make choices in the presence of scarce resources.

We divide economics into 2 major broad categories depending on scale. Any guesses?

• Microeconomics — One that covers the small scale like companies and individuals
• Macroeconomics — One that studies how an overall economy works and how the market and other systems work as a whole.

Here are 5 terms related to Microeconomics

1. Law of Demand — Quantity Demanded and the price of a product is usually inversely related which is known as the law of demand.
2. Income Effect — A change in demand for a product resulting from a change in purchasing power is called the Income effect. For most goods called normal goods (meat) if income increases, demand increases too. For Inferior goods (grain) the relationship works in opposite direction.
3. Price Elasticity Demand — Price elasticity of demand allows for the comparison of the responsiveness of quantity demanded with changes in prices. Two widely used majors are Own price elasticity of demand and the cross-price elasticity of demand.
4. Own Price Elasticity of Demand — Own price elasticity of demand is the percentage change in the quantity demanded in the product as a result of the percentage change in the price of the product. It is unitless, as are other elastic concepts. (It has a sign and magnitude) Own price elasticity is usually negative reflecting the Law of demand.
5. Cross Price Elasticity of Demand — It is the percentage change in the quantity demanded of the product in response to a percentage change in the price of another product.

I will love to hear feedback at @HimanshuKhaita4 for the content above. Also, I will be posting 5 words for every weak related to different topics (mostly tech and finance).

Link to my Twitter thread — here